Web giant Google avoided £1billion in tax by using the island of Bermuda as a tax haven, official documents reveal, as David Cameron calls for a global crackdown on multinationals' tax arrangements.

In an open letter to fellow leaders of the G8, written as the UK takes over the presidency, Mr Cameron asked his fellow leaders to coordinate global efforts to stop tax avoidance by multinational businesses.

Google funnelled £6billion through Bermuda last year, halving its 2011 tax bill and paying £1billion less to government coffers.

The company paid £6million in UK tax last year, funnelling 80 per cent of its global revenue through the tiny island of Bermuda, twice as much as three years ago.

Mr Cameron said co-ordinated action is needed to make major corporations and wealthy individuals pay their fair share of tax. “I do believe we all have a common interest in being able to tell our taxpayers who work hard and pay their fair share of taxes that we will make sure others do the same,” he wrote in an open letter to the G8.

“We pay lots of taxes; we pay them in the legally prescribed ways,” he told Bloomberg. “I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate.”

The tax arrangements add fuel to accusations made by British MPs that Google and other firms including Starbucks and Amazon, have been “immorally” minimising its tax bills.

Matt Brittin, Google’s UK boss, said MPs were blaming companies for a system that they had designed. “Google plays by the rules set by politicians,” he said. “The only people who really have choices are politicians who set the tax rates.”

Last year, Starbucks caved into public pressure and promised to pay £20m to the Treasury over the next two years. However it was also the trigger for more criticism of “optional” tax payments.

Google sent £2.6billion of British revenue via Bermuda, legally reducing its UK tax bill by over £200million.

Mr Cameron said he wanted to get agreement on tackling cross-border tax avoidance at this year’s G8 meeting in Northern Ireland.

He told his fellow world leaders that they must start work now on preparing “bold steps” to take when they meet in Northern Ireland in June for the annual summit.

“It is clear that in 2013 the world will continue to face grave economic uncertainty.”

He said that his first priority would be to deal with the challenges in the UK but wanted the G8 to work together to “make a tangible difference by firing up economies and driving prosperity, not just in our own countries, but all over the world”.

The summit will see US president Barack Obama, Russian president Vladimir Putin, German chancellor Angela Merkel and other world leaders gather for two days at the Lough Erne golf resort in Co Fermanagh.

George Osborne has already pledged to give the OECD “more resources” to fund a clamp-down to ensure global firms pay their “proper share of taxes.” Pascal Saint–Amans, the director of the OECD’s centre for tax policy and administration, said that the issue of tax avoidance is now recognised as a “political concern.”

Google’s UK chief Matt Brittin has claimed that it is right Google pays the bulk of its taxes in America rather than Britain because it was invented there. It claims its UK operation is “a service arm” and collects advertising revenue, the bulk of its income, via Ireland where taxes are lower. The Irish company in turn pays them to a company in the Netherlands which is registered for tax purposes in Bermdua.

Google’s tax rate outside of the US was 3.2 per cent in 2011, its official documents disclose.